Topic: rule 74.
Summary Settlement of Estates bar, the title has already passed to an innocent purchaser for value, the gov’t
Case: 26. PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), petitioner, vs. HON.
RUMOLDO R. FERNANDEZ, Regional Trial Court of Lapu-Lapu City (Branch 54); and
the Heirs of the Deceased Spouses JUAN CUIZON and FLORENTINA RAPAYA,
respondents. G.R. No. 138971 | June 6, 2001
Doctrine: Persons unduly deprived of their lawful participation in a settlement may
assert their claim only within the two-year period after the settlement and
distribution of the estate; Prescription period does not apply to those who had no
part in or had no notice of the settlement.—A perusal of the foregoing provision will
show that persons unduly deprived of their lawful participation in a settlement may
assert their claim only within the two-year period after the settlement and
distribution of the estate. This prescription period does not apply, however, to
those who had no part in or had no notice of the settle-of limitations. Moreover, by
no reason or logic can one contend that an extrajudicial partition, being merely an
ex parte proceeding, would affect third persons who had no knowledge thereof. Be
that as it may, it cannot be denied, either, that by its registration in the manner
provided by law, a transaction may be known actually or constructively.
Emergency recit: Lot 4673 was registered in the names of Florentina Rapaya,
Victorino Cuizon among others covered by an OCT. Sometime thereafter, Jorgea
Igot-Soroño et al executed an Extra-judicial Partition claiming to be the only
surviving heirs of the registered owners, through which they were issued a TCT. Said
lot was among the object of an expropriation proceeding before the RTC. RTC
approved the compromise Agreement b/w the Export Processing Zone Authority
(EPZA) and Igot-Soroño et al wherein EPZA would pay a certain amount in exchange
for the subject property. The Heirs of the Florentina Rapaya and Juan Cuizon filed a
complaint to nullify several documents including the TCT issued to EPZA for they
were excluded from the extrajudicial settlement of the estate. EPZA filed a motion
to dismiss on the ground of prescription and was denied thus elevated the case to
the CA wherein the CA ruled that the heirs of Igot-Soroño defrauded the other heirs
by falsely representing that they were the only heirs enabling them to appropriate
the land in favor of EPZA. This method of acquiring property created a constructive
trust in favor of the defrauded party and grants them the right to vindicate
regardless of the lapse of time.
Issue: W/N private respondent’s claim over the expropriated land has prescribed.
SC: Yes. As provided in the Rules of Court, persons unduly deprived of their lawful
participation in a settlement may assert their claim only w/in the 2-year period after
the settlement and distribution of the estate. However, this prescriptive period will
not apply to those who had not been notified of the settlement.
The Private respondents are deemed to have been notified of the extrajudicial
settlement since it was registered and annotated on the certificate of title over the
lot. The only exception to this rule is when the title still remains in the hands of the
heirs who have fraudulently caused the partition of the said property. In the case at
through EPZA. Their remedies of action for reconveyance resulting from fraud, and
action for reconveyance based on an implied constructive trust has already
prescribed as well the former having prescribed 4 years from the discovery and the
latter prescribing 10 years from the alleged fraudulent registration.
Facts: The subject of the present controversy is Lot No. 4673 of the Opon Cadastre
situated in Lapu-Lapu City, covered by Original Certificate of Title (OCT) No. RO-
2537 (May 19, 1982) and registered in the names of Florentina Rapaya, Victorino
Cuizon, Isidro Cuizon, Ursula Cuizon, Benito Lozano, Isabel Lozano, Pelagia Lozano,
Augusto Lozano, Valeriano Ybañez, Jesus Ybañez, Numeriano Ybañez, Martino
Ybañez, Eutiquio Patalinghug, Celedonio Patalinghug, Santiago Patalinghug and
Silvino Patalinghug. The lot has an area of 11,345 square meters, more or less.
On May 15, 1982, Jorgea Igot-Soroño, Frisca Booc and Felix Cuizon executed an
Extrajudicial Partition, in which they declared themselves as the only surviving heirs
of the registered owners of the aforesaid lot. Consequently, they were issued TCT
No. 12467 on July 8, 1982.
Considering that the said lot was among the objects of expropriation proceedings
and pending before it, the RTC of Lapu-Lapu City rendered a partial Decision. In that
Decision, the RTC approved the Compromise Agreement entered into between the
Export Processing Zone Authority (EPZA) and the new registered owners of Lot No.
4673; namely, Jorgea Igot- Soroño, Frisca Booc and Felix Cuizon.
In accordance with the approved Compromise Agreement, EPZA would pay P68,070
as just compensation for the expropriation of the subject property, which was to be
used for an export processing zone to be established in Lapu-Lapu City.
On July 29, 1996, private respondents filed with the RTC of Lapu-Lapu City a
Complaint for Nullity of Documents, Redemption and Damages against petitioner
and Jorgea-Igot Soroño et al. Docketed as Civil Case No. 4534-L. The Complaint
alleged that herein private respondents had been excluded from the extrajudicial
settlement of the estate. It likewise sought the nullification of several documents,
including TCT No. 12788 dated October 13, 1992, issued in the name of herein
petitioner.
On February 17, 1997, petitioner filed a Motion to Dismiss the Complaint on the
ground of prescription. This Motion was denied by respondent judge in the Order
dated January 12, 1998. A Motion for Reconsideration thereof was likewise denied
in the Order dated March 31, 1998.
On April 30, 1998, petitioner elevated the matter to the Court of Appeals through a
Petition for Certiorari. As earlier noted, the CA dismissed the Petition.

Issue:
(1) W/N the private respondent’s claim against expropriated property had
prescribed. (this one involves section 4 rule 74)
(2) Whether or not reconveyance lies against expropriated property
Held:
1. Yes. The pertinent provisions of section 4, Rule 74 are as follow:
Section 4. Liability of distributees and estate. — If it shall appear at any time within
two (2) years after the settlement and distribution of an estate in accordance with
the provisions of either of the first two sections of this rule, that an heir or other
person has been unduly deprived of his lawful participation in the estate, such heir
or such other person may compel the settlement of the estate in the courts in the
manner hereinafter provided for the purpose of satisfying such lawful participation.
And if within the same time of two (2) years, it shall appear that there are debts
outstanding against the estate which have not been paid, or that an heir or other
person has been unduly deprived of his lawful participation payable in money, the
court having jurisdiction of the estate may, by order for that purpose, after hearing,
settle the amount of such debts or lawful participation and order how much and in
what manner each distributee shall contribute in the payment thereof, and may
issue execution, if circumstances require, against the bond provided in the
preceding section or against the real estate belonging to the deceased, or both.
Such bond and such real estate shall remain charged with a liability to creditors,
heirs, or other persons for the full period of two (2) years after such distribution,
notwithstanding any transfers of real estate that may have been made.
A perusal of the foregoing provision will show that persons unduly deprived of their
lawful participation in a settlement may assert their claim only within the two-year
period after the settlement and distribution of the estate. This prescription period
does not apply, however, to those who had no part in or had no notice of the
settlement. Section 4, Rule 74 of the Rules of Court, is not meant to be a statute of
limitations. Moreover, by no reason or logic can one contend that an extrajudicial
partition, being merely an ex parte proceeding, would affect third persons who had
no knowledge thereof. Be that as it may, it cannot be denied, either, that by its
registration in the manner provided by law, a transaction may be known actually or
constructively.
In the present case, private respondents are deemed to have been constructively
notified of the extrajudicial settlement by reason of its registration and annotation
in the certificate of title over the subject lot. From the time of registration, private
respondents had two (2) years or until July 8, 1984, within which to file their
objections or to demand the appropriate settlement of the estate.
On the matter of constructive notice vis-à-vis prescription of an action to contest an
extrajudicial partition, a leading authority on land registration elucidates as follows:
"While it may be true that an extrajudicial partition is an ex parte proceeding, yet
after its registration under the Torrens system and the annotation on the new
certificate of title of the contingent liability of the estate for a period of two years as
prescribed in Rule 74, Section 4, of the Rules of Court, by operation of law a
constructive notice is deemed made to all the world, so that upon the expiration of
said period all third persons should be barred [from going] after the particular
property, except where title thereto still remains in the names of the alleged heirs
who executed the partition tainted with fraud, or their transferees who may not
qualify as ‘innocent purchasers for value’. If the liability of the registered property
should extend indefinitely beyond that period, then such constructive notice which
binds the whole world by virtue of registration would be meaningless and illusory. x
x x."7 (Emphasis supplied)
The only exception to the above-mentioned prescription is when the title remains in
the hands of the heirs who have fraudulently caused the partition of the subject
property or in those of their transferees who cannot be considered innocent
purchasers for value.
In this regard, title to the property in the present case was no longer in the name of
the allegedly fraudulent heirs, but already in that of an innocent purchaser for value
– the government. Moreover, the government is presumed to have acted in good
faith in the acquisition of the lot, considering that title thereto was obtained
through a Compromise Agreement judicially approved in proper expropriation
proceedings.
2. No.
An action for reconveyance resulting from fraud prescribes four years from the
discovery of the fraud; such discovery is deemed to have taken place upon the
issuance of the certificate of title over the property. Registration of real property is
considered a constructive notice to all persons and, thus, the four-year period shall
be counted therefrom. Clearly then, private respondents’ action for reconveyance
based on fraud has already prescribed, considering that title to said property had
been issued way back on August 11, 1982, while the reivindicatory suit was
instituted only on July 29, 1996.
Even an action for reconveyance based on an implied constructive trust would have
already prescribed just the same, because such action prescribes ten (10) years
from the alleged fraudulent registration or date of issuance of the certificate of title
over the property. The imprescriptibility of an action for reconveyance based on
implied or constructive trust applies only when the plaintiff or the person enforcing
the trust is in possession of the property. In effect, the action for reconveyance is an
action to quiet the property title, which does not prescribe. Undisputedly, private
respondents are not in possession of the disputed property. In fact, they do not
even claim to be in possession of it, even if to do so would enable them to justify
the imprescriptibility of their action.

Finally, it must be remembered that reconveyance is a remedy of those whose

property has been wrongfully or erroneously registered in the name of another.
Such recourse, however, cannot be availed of once the property has passed to an
innocent purchaser for value. For an action for reconveyance to prosper, the
property should not have passed into the hands of an innocent purchaser for value

Indubitably, we find that the property has already been conveyed to the
government in appropriate expropriation proceedings, the regularity or validity of
which has not been questioned. Petitioner should, therefore, enjoy the security
afforded to innocent third persons under our registration laws. Equally important,
its title to the property must be rightfully preserved.

Hence, private respondents’ action to recover the subject property from the
government cannot be maintained, not only because of the prescription of the
action, but on account of the protection given to innocent purchasers for value
granted under our land registration laws. Indeed, the inevitable consequences of
the Torrens system of land registration must be upheld in order to give stability to it
and provide finality to land disputes.

This ruling notwithstanding, private respondents are not without recourse. They
may sue for damages their co-heirs who have allegedly perpetrated fraud in Civil
Case No. 4534-L pending before the RTC. The right and the extent of damages to be
awarded to private respondents shall be determined by the trial court, subject to
the evidence duly established during the proceedings.

Dispositive: WHEREFORE, the Petition is hereby GRANTED and the assailed Decision
of the Court of Appeals REVERSED. The Orders of the Regional Trial Court of Lapu-
Lapu City (Branch 54) in Civil Case No. 4534-L, dated January 12, 1998 and March
31, 1998, are SET ASIDE and the said Civil Case, as against petitioner, is DISMISSED.
No costs.
SO ORDERED.